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Monthly Archives: November 2008

Calculated Risk just pointed to the joint statement from the Fed, Treasury and FDIC. What I find amazing is that the post was timed at 12:19am, Eastern Standard Time. By the time I looked at it, 1:30am EST, there were already 162 comments.

That says that vast numbers of people globally see Tanta as the go-to source on the financial crisis. Quite right, too.

It’s after midnight in New York and Washington, but both The Wall Street Journal and the Financial Times are reporting that a bailout of Citigroup has just been agreed. The WSJ has far more detail, but what’s interesting to me is that at on a day and time when most Americans aren’t following the news, this breaking information seems to have all but crashed the WSJ’s servers.

My guess is that information-hungry readers throughout Asia are trying to log on and the load is proving far too great for WSJ.com.

I could list hundreds of management, cultural, and operational reasons why I believe that GM is such a flawed organization, but to me, a pair of root causes standout: Most of the senior executives – and many of the managers — are (1) clueless about what matters most and (2) suffer froma “no we can’t” mindset.

The culture and work practices at GM almost seem designed to create executives who are clueless about what kinds of cars people want to buy and what kind of experiences that car owners want to have — and about a lot of other important things as well.The executives were criticized for being so insensitive and clueless that they flew corporate jets to Washington to beg for money;unfortunately, that is just the tip of a dangerous iceberg.For starters, my experience with GM is that – more so than any company I have dealt with – the norm in meetings is that the highest status person in the room does all or most of the talking. Plus, more so than any organization I have ever dealt with, employees are expected to express agreement with their bosses.Why didn’t anyone have the guts to tell the executives that taking a private plane to beg for a bailout was a bad idea? I suspect that it is just standard operating procedure: GM is a culture where subordinates are expected to shut-up and kiss-up when the boss is around.I can think of a few exceptions, one manager I’ve met recently in particular.But on the whole it is as if the system is designed to prevent the upward flow of information.At first, when I was in graduate school, I thought this was a personality characteristic of the first few GM executives I met.But then I started keeping track of what happened when managers and executives arrived and left meetings. To entertain myself as the top dog droned on, I would measure talking time.Regardless of the subject (and who had the greatest expertise in the room), the highest status person would blab away – and when he or she left the room, the next highest ranking person would then demonstrate GM’s blabbermouth pattern of leadership.Note I have been seen this pattern for almost 30 years at GM – the cars have changed but the yakking pattern has not.

Not only are managers and executives insulated from learning what goes in their company because they generally talk rather than listen, they are also insulated from experiencing what it is like to buy and own a car.GM has a perk for managers down to fairly low levels where all are given a GM car to drive – they rotate from one car to another.I am not sure of the exact details, but answers to the questions I’ve asked over the years suggest it goes something like this: the lowest level managers have to buy their own cars, the ones at somewhat higher levels get a new car to drive every six months or so but have to do some servicing, the managers who are somewhat higher-up get somewhat fancier cars and are freed from any servicing (gas is even put in the cars of some executives so they don’t have to go to the service station), and the highest level executivesget a car and a driver.

In other words, this system effectively insulates people in management – especially those in senior management — from experiencing what it is like to shop for, bargain for, purchase, service, and sell a car. They only get the driving experience. Well, except for the most senior executives, who don’t even get that experience — they watch a person in the front seat drive a big car. Now, it is true, that the most senior executives do own GM cars for personal use, but it is my understanding that when a car is delivered to a senior executive, special attention is devoted to the car – even during the production process –to make sure the top brass aren’t exposed to a car with any flaws. Wouldn’t that be nice?

So there you have it, a system that seems designed to isolate executives from reality.They talk instead of listen and are protected from the experience of owning car.I might be exaggerating some, but not much.

It really is worth reading the whole thing. The detail is pretty depressing, but provides a valuable picture of how rotten a company’s management can get.

I devote a very small amount of my time to watching what happens in equity markets, since there are plenty of more important things in the world. You can read Felix Salmonpassim on why media fixation on the Dow (or the S&P) is so nonsensical.

But the depths the market is plumbing at the moment make me wonder if we’re going to get to that particular witching point in December 1996 when then-Fed chairman Alan Greenspan decried “irrational exuberance”. The level of the Dow when he gave that speech was 6,437, the S&P was 744 and the Nasdaq was 1,300. Nasdaq and the S&P have made it down to Greenspan’s irrational exuberance; the Dow only has another 1,100 to go, and what’s that between friends?

Ages ago, my wife gave me the best birthday present I ever received: several volumes of the yearbook issued by the Dutch post office and several other Dutch postage ephemera. Cost of the present: zero. She had written to the Dutch post office to say I was a fan of their design and did they have anything for me. I’m not a stamp collector, but I am an aficianado of Dutch design.

Contemporary Dutch design expresses complete confidence in the modern age. No need to be retro, or to pay obeisance to traditional forms. The Obama administration has plenty on its plate, to say the least, but it would be one sign of a confident nation if the US Treasury and the US Postal Service were to engage the best contemporary designers in future.

To all those readers of this blog who have requested shorter, snappier, less technical and abstruse postings, the following. I write this blog for me, not for my readers. Writing things down is the only way for me to communicate effectively with myself about complex issues. By doing this writing in the form of a blog, I gain the option of taking on board the comments and criticism of those who read my scribblings and feel compelled to respond to it. I gain this benefit at the cost of having to plough through a lot of stuff that makes little or no sense, in order to uncover the few pearls hidden among the swine. There are minor vanity/ego rents to having people read what I write, and my consulting income may receive an indeterminate boost from these activities. But all that is secondary to my need to write. I don’t know something unless I have written it down.

I started this blog quite independently, at http://maverecon.blogspot.com/. I was invited by the Financial Times to move my blog to their site. Because of the likelihood of greater vanity/ego rents and the possibility of more frequent intelligent feedback through wider readership, I accepted this invitation. When the FT lose interest, I will go private again. I don’t get paid for this blog.

So no, my blogs will not get shorter, snappier, less demanding, less abstruse, complicated and confusing. My blog postings are and will be excessively lengthy, long-winded, demanding, abstruse, complicated and confusing where the problems are complicated and confusing. I make no concessions to my readers. Why should I? The readers I lose or miss as a result of writing the way I do are the readers I don’t want in the first place. They can always go to the National Enquirer, Bild or the News of the World.

Will Davies, despite the clear attempt to go straight into Pseud’s Corner, makes an interesting argument that social media does a good job on the questions “What can I know?” and “What do I like?”, but a poor job on “What should I do?” He reckons:

If there were greater potential reputational currency connected to the moral sphere, perhaps we would be more inclined – out of sheer vanity, but so what? – to go about performing extroverted ethical acts.

Willem Buiter doesn’t pull any punches. I don’t always agree with him, but he’s worth reading. Here’s the summary of his analysis of the 17 members of president-elect Obama’s transition economic advisory board:

They’re old

Too few serious economists

Far too many lawyers

They are protectionist

They are the unalluring faces of past failures

I think he’s reading too much into the 17 announced names. Look at Obama’s voluminous public statements and writings, and the nature of the policy team that he has assembled. I think even maverick economists like Buiter will end up more pleased than provoked.

As Kevin Drum points out, the anti anti-Summers backlash is growing. I think Summers was a good Treasury secretary the first time around and don’t really have a dog in the hunt this time. But I do have a continuing interest in what happens to Summers because he’s one of two people in the Davos universe whom I have been mistaken for.

I don’t see it myself, but twice in my Davos experience someone thought I was Summers. Once, and this I found bizarre in the extreme, someone thought I was Binyamin Netanyahu. I think it’s the thin Alpine air.

I know Matthew Yglesias has written about Obama as an urban-oriented president, but it’s surprising how little noted his big-city provenance has been in the election. I tried to think of the last president who could claim to be from a big city, and you need to go way back — I think 100 years to Taft.

Why does this matter? I think the rhetoric of American politics which exalts small town America is part of what provokes continuing neglect of some of the country’s biggest problems, which are in the big cities. The education system in the US isn’t great, but it’s particularly bad in the inner city. Poverty and deprivation can be bad in rural areas, but there are concentrations of the country’s poorest people in the biggest cities. Public transport matters most in cities, and is terribly neglected. I’m hoping a president who’s really from a city, my home town, Chicago, will begin to make a difference.

Lots of presidents had time in Washington, but the life of most senators and certainly vice-presidents is pretty divorced from city concerns. So let’s look at Obama’s presidential predecessors:

George W Bush — Houston ties, but not a city guy, as his attachment to clearing brush on a ranch demonstrates

Bill Clinton — Little Rock hardly counts as the big city

George H W Bush — Midland, Texas

Ronald Reagan — Los Angeles suburbia

Jimmy Carter — Plains, Georgia

Gerald Ford — Grand Rapids, Michigan

Richard Nixon — Los Angeles suburbia

Lyndon Johnson — west Texas hill country

John Kennedy — perhaps, but his base was more Boston suburbs than the city itself

Dwight Eisenhower — OK, he was president of Columbia University, but most of his pre-presidential life was on military bases